Inflation is more firmly on a downward trend. But economists at Wells Fargo suspect the FOMC remains concerned about the ongoing strength in labor costs. 

There is still work left to be done in the fight against inflation

“The Consumer Price Index came in lower than expected in November, with the headline rising 0.1% and the core advancing 0.2%. Nevertheless, a sustained return to the Fed's inflation goal remains some ways away. Services ex-shelter and ex-travel picked up in November, and the overall core index is running at a 4.3% annualized rate the past three months.” 

“While the pace of inflation is expected to slow further over the next few months, the roughly 5% pace of wage growth is likely to keep the Fed in inflation-fighting mode for a while yet.” 

“We look for the Fed to proceed with its signaled 50 bps hike tomorrow, although the prospect of a further downshift to a 25 bps hike come its first meeting of 2023 has increased with this report.”